During the past few years, the latest “buzzword” within the entrepreneurial community has been “disruption.”
What exactly is disruption and how does it apply to bitcoin?
In its simplest form, disruptive innovation is a term used to describe an upheaval that creates a new market and value network.
The new innovation eventually disrupts the existing market by displacing the leading firms, products and alliances within the market.
Clayton M Christensen is credited with coining the term, “disruptive innovation” in 1995. Many financial historians have called it the “most influential business idea of the early 21st century”.
Types of Innovation – Blockchain Disruption
According to Christensen, there are actually four different types of innovation.
- Sustaining innovation does not significantly affect existing markets.
- Evolutionary innovation improves a product in an existing market.
- Revolutionary innovation is unexpected but does not affect existing markets.
- Disruptive innovation creates a completely new market by providing a different set of values which ultimately (and unexpectedly) overtakes an existing market.
An example of an evolutionary innovation would be fuel injection for gasoline engines, which displaced carburetors.
An example of a revolutionary innovation would be the first automobiles in the late 19th century. The first automobile was certainly quite revolutionary. However, it was extremely expensive and considered a luxury item.
It had no disruptive force on the horse & buggy industry because very few automobiles were sold. In 1908, the very first affordable automobile was introduced to the general public was the Ford Model T.
This is a perfect example of a disruptive innovation because it eventually eliminated the horse & buggy industry.
As you can see, a disruptive innovation is truly a spectacular occurrence. It has the ability to completely change the way society functions.
Disruptive innovations are generational events, definitely not something you see every day (think of the internet). The dream of any entrepreneur or startup company is to create a product or service that is truly disruptive.
Most business owners never experience this dream.
It’s truly a rare event.
In the grand scheme of disruptive innovations, where does this leave bitcoin?
- Did Satoshi Nakamoto actually realize the dream of all entrepreneurs?
- Does bitcoin truly have disruptive capabilities or is it all hype?
Before we answer that question, let’s review Nakamoto’s bitcoin discovery from 2008. There seems to be some confusion concerning exactly what Nakamoto discovered.
Blockchain Technology Is Needed For Bitcoin To Exist
Nakamoto introduced bitcoin to the world on January 3, 2009. However, he also introduced blockchain technology.
Without the blockchain, bitcoin doesn’t exist. It’s useless.
In fact, the blockchain that supports bitcoin was developed specifically for the digital currency. This explains why it took people so long to realize that the technology could be used in other areas.
In its simplest form, blockchain is a digital decentralized ledger that keeps a record of all transactions that take place across a peer-to-peer network. The major innovation is the fact that the technology allows market participants to transfer assets across the internet without the need for a centralized third party.
In other words, blockchain technology removes the middleman from all transactions.
Without question, bitcoin and the accompanying blockchain technology certainly have the potential to disrupt many different industries. Of course, this explains why the price of bitcoin has exploded to the upside during the past 12 months.
Let’s explore a few of the industries that could be on the verge of major changes.
Industries Poised for Disruption
This is not going to be an exhaustive list of all industries that have the potential of “disruptive innovation” but it should give you a good idea of what is on the horizon.
Arguably, the most vulnerable industry to blockchain technology is the financial services industry. Specifically, banks have the most to lose in terms of the blockchain’s ability to completely alter the way they operate.
Why are banks vulnerable?
Because the traditional banking model hasn’t changed in over 300 years. The Bank of England introduced the original banking model in 1695. Essentially, it’s remained the same for 323 years.
A bank is nothing more than a financial intermediary. It acts as a middleman between consumers and their money. Therefore, it’s a very simple model to disrupt.
The blockchain is a disinter-mediation wrecking machine. It performs best at removing all third party participants, like the banks.
Banks are literally asking to be disrupted. Twenty years from now, the banking industry will look completely different than it does today. The majority of the change will be driven by bitcoin and the blockchain.
The business of money transfers is very similar to the banking industry in the fact that nothing has changed in 150 years. The industry has remained static for the past century.
Blockchain could easily be used to create a more direct payment flow that connects payers and payees without intermediaries. This flow of payments could occur domestically or across borders with extremely low fees and lightning fast speed. Anybody who has attempted to send money via wire transfer will probably welcome a change to the money transfer model.
Education is another example of an industry that has remained stagnant for decades. Blockchain technology is waiting in the wings to rescue this largely bureaucratic industry from the dustbin of mediocrity.
By its very nature, the education industry is centered around the necessity of verification. All academic credentials must be universally recognized and verifiable. This verification process involves all educational levels, primary & secondary schools as well as university environments. Verifying academic credentials largely remains a manual process, creating a huge amount of unnecessary paperwork.
Introducing blockchain technology to the education system could streamline verification procedures, thus reducing fraudulent claims of unearned educational credits.
Sony Global Education and IBM have teamed up together to develop a new educational platform that uses blockchain to secure and share student records. This is just the tip of the iceberg in terms of the blockchain’s ability to uproot the fledging education system.
Now here’s an industry that definitely needs help with a more streamlined verification process and increased transparency. As we all know, elections require authentication of voters’ identity along with secure record keeping to track votes.
In the not-too-distant future, blockchain tools could serve as a foundational infrastructure for casting, tracking and counting votes.
Follow My Vote is a blockchain voter startup company on the leading edge of introducing this technology to the voter industry. The company recently unveiled the alpha version of its program.
Essentially, the program creates a verifiable audit trail, ensuring that no votes are changed or removed and no illegitimate votes are added. Say goodbye to voter fraud!
This industry is very similar to education in terms of paperwork and verification. Title companies are notorious for sloppy record keeping involving deeds, liens and other real estate forms.
Public records for real estate are filled with errors and possible fraud. The process for recording deeds and liens has changed very little during the past several years, despite the fact that we live in a new age of technology.
The blockchain offers a way to reduce the need for paper-based record keeping and also increase transactions. It can help record, track and transfer land titles and property deeds more accurately.
This is a perfect industry for blockchain technology to upend.
As it stands today, the healthcare industry is unable to securely share data across platforms. Enhancing data collaboration between providers could ultimately mean a higher probability of accurate diagnoses. In turn, this would increase the likelihood of appropriate treatments which would allow the healthcare industry to deliver more cost-effective care.
Blockchain technology could allow hospitals, payers and other parties in the healthcare chain to share their networks without compromising data security and integrity.
Two startup companies are leading the charge to promote the blockchain within the healthcare industry. These companies are Gem and Tierion.
- Gem is concentrating on establishing data sharing between healthcare providers
- Tierion is building a platform for data storage and verification.
The Tip Of The Blockchain Iceberg
These are just a few of the industries that are prime candidates for bitcoin and blockchain disruption. Other industries include:
- cloud storage
- supply chain management.
This is just the beginning of the bitcoin and blockchain revolution. We are still in the first inning of this disruptive innovation.
Why have so many of these industries remained stagnant for the past several decades?
The answer is quite simple; job security.
There was absolutely no incentive for the majority of these quasi monopolistic companies to promote change. However, the tide is turning, thanks to bitcoin and the blockchain. Twenty years from now, the majority of these industries will look completely different versus today.